Investing.com -- Shares of Lumen Technologies (NYSE:LUMN) climbed 4.3% following a Reuters report that the company has initiated a process to sell its consumer fiber operations. The sale is part of Lumen's strategy to move away from its legacy mass markets business and focus on leveraging the artificial intelligence boom for growth.
The Monroe, Louisiana-based telecommunications firm is working with Goldman Sachs (NYSE:GS) to explore potential deals, which could range from selling the entire fiber unit to forming joint ventures or partial stake sales. The discussions are in the preliminary stages, and there is no certainty that a deal will be reached. The consumer fiber business, which delivers high-speed internet to residential customers, could be valued between $6 billion and $9 billion depending on the deal structure.
Lumen's shift towards AI and technology services has been marked by recent contract wins with major tech companies, including Microsoft (NASDAQ:MSFT), Meta (NASDAQ:META), Alphabet (NASDAQ:GOOGL), and Amazon (NASDAQ:AMZN). These new deals have contributed to a significant increase in Lumen's share price this year, despite a decline in revenue and a wider net loss in the most recent quarter compared to the previous year. The company's fiber broadband business, however, showed a 16.6% growth compared to the same quarter last year.
The move to divest the consumer fiber operations aligns with comments from Lumen's CFO Chris Stansbury at the Bank of America (NYSE:BAC) Leveraged Finance Conference. Stansbury indicated that the fiber business is a valuable asset but may be better managed by a company with a wireless offering.
Lumen's decision to sell the fiber unit is also seen as an effort to reduce its substantial debt, which stood at $18.1 billion as of September 30. In September, the company undertook a debt swap to extend bond maturities, which led to a downgrade in its credit rating by S&P Global (NYSE:SPGI) Ratings. However, in November, S&P placed Lumen on CreditWatch Positive, suggesting a possible credit rating upgrade following its fourth-quarter results, driven by the recent AI contract wins.
Lumen, formerly known as CenturyLink (NYSE:LUMN), has undergone several strategic shifts over the years, including the sale of local exchange carrier assets to Apollo-backed Brightspeed in 2021 for $7.5 billion. The company's focus on networking and cybersecurity services for Big Tech firms is part of its broader plan to pivot away from its declining legacy business and embrace emerging technology trends.
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